Archive for the ‘Finland’ Category

As previously flagged in this newsletter, some clusters are humming and others are on life support. Elisabeth Rocha (Belgium), a long-time supporter of TCI (see above), provided timely advice at TCI Finland:

“The secret of a successful cluster is to remain open for changes. Second important thing is good teamwork. The energy shouldn´t be wasted in tangling with the problems inside the company or cluster.

The success lies in being open to outsiders. A good cluster achieves a balance – all people in the region should be benefiting from it, not just the one sector involved in the cluster.

A successful cluster spreads its growth to other sectors. Too often forgotten is the importance of looking far ahead to the future. Many times we focus only on the present, which is a mistake. A cluster turns out bad if there is some company which is thinking only itself and doesn’t add any benefit to others. Usually that kind of company is involved only because of the public funding.”

A very interesting OECD report “Higher Education and Region’ has landed on our desk, written by Cockatoo member and ‘Oz-phile’ Patrick Dubarle, Paul Benneworth et al. It should be compulsory reading for every Vice-Chancellor, university academic and regional development practitioner in the civilized world. It draws on findings from 14 regions across 12 countries.

The basic message is that higher education institutions (HEIs) must do more than educate and research – they must engage with others in their region, provide opportunities for lifelong learning, and contribute to the development of knowledge-intensive jobs.

The report synthesizes the main developments, and provides scores of examples of best practice. Some that attracted our attention are:

The ‘Knowledge House’ in NE England – addresses the reluctance of SMEs to go anywhere near a university by providing a nifty, common entry point to the five universities in the region.

University Jaume I in Valencia – helping to transform the SME-based ceramic tile industry.

University of Sunderland – helping to make Nissan’s new plant the most productive in Europe.

Provincial University of Lapland – reaching out to remote communities.

Aalborg University (Denmark) building its education program around Problem Based Learning.

Monterrey International Knowledge City (MICK) in north east Mexico.

The book can be purchased on-line at the OECD – ISBN 978-92-64-03414-3. Patrick Dubarle is now a freelance consultant, living at beautiful Meudon – contact him at phdubarle@club.fr

Most Nordic countries have been pursuing aggressive policies to promote entrepreneurship – a new report from Norway’s Nordisk Innovations Center assesses how they’ve performed.

The report recognizes that Nordic nations are making major investments, especially in areas related to R&D spending. It also notes an increasing convergence between entrepreneurship and innovation policies.

Yet the report criticizes the absence of effective program evaluations. There are poor linkages between researcher and policy makers, and most policies are developed in a top-down manner. Policymakers must do a better job of reaching out to entrepreneurs, and designing programs that meet their real needs and demands.

We continue to trawl through our archives, and today we came across a frank account of Finland’s industrial performance. The speaker was Mr. Tarmo Lemola (Finnish Ministry of Trade & Industry), the place was an ANU seminar, and the time was July 2002.

When a deep recession affected Finland in 1991-93, GDP declined by 20% and unemployment rose to 20%. Main factors were the slowdown of the European economy, the collapse of the Soviet Union and mistakes in monetary policy. The recovery was quick however, and export growth and R&D expenditure have been of stellar proportions.

Mr. Lemola indicated that Nokia was ‘the most important single explanatory factor’ behind Finland’s recovery. Although close to bankruptcy in the recession, Nokia became the agent of innovation and change – and it is now the pivotal company driving cluster dynamics and facilitating industry adjustment to the new techno-economic environment.

Nokia accounts for:

§30% of the ICT cluster employment (Nokia has 25,000 employees in Finland).

§300 first-tier partnerships.

§24% of Finland’s total exports and 54% of business R&D.

The ICT cluster is characterised by fairly open competition among operators, demanding customers, close interaction between firms, universities and research groups and the enthusiasm of Finnish consumers to adopt new technology.

Moreover, the ICT cluster has driven the export growth of ICT-user industries such as wood products, paper, basic metals, machinery etc. Manuel Castells (1999) has also observed that the Finnish innovation system has been strengthened by a strong identity, a focus on advanced technology, the ability to create network innovations, a democratic civil society and a welfare state that has been defended under difficult circumstances.

The Q&A session was most illuminating. Questioners fished for an admittance that, given its central importance, Nokia received strategic government support (procurement, R&D etc.). Not so, said Mr. Lemola – Nokia has built a strong competitive position, and despite 93% of the company being owned by foreign interests, the bulk of R&D is still conducted in Finland. (Amonopolist with a national conscience?)

More OECD governments are giving companies tax breaks to drive innovation and cut their direct spending on R&D, while also encouraging public research organisations to commercialise their inventions, according to a new OECD report.

The key findings of the OECD Science, Technology and Industry Scoreboard 2007 are:·two thirds of OECD members offer businesses tax subsidies – up from 12 a decade ago.·Spain, China, Mexico and Portugal provide the largest tax subsidies.·Canada and the Netherlands continue to be more generous to small firms.·Emerging economies – Brazil, India, Singapore, South Africa – also offer a generous tax environment for businesses investing in R&D.·Sharp rise in globalisation of innovation e.g. international co-authorship of scientific publications.·Foreign ownership of domestic patents up 50% between early 1990s and early 2000s.·EU countries interact most with each other – less globalised than USA (interesting!).·Total gross expenditure on R&D grew 4.6% p.a. in real terms between 1995-2001, but slowed to 2.2% p.a. between 2001-2005.·In the USA, 4/5 of researchers work in business sector – in Japan it’s 2/3, and 1/2 in EU.·No. of business researchers grew rapidly in smaller OECD countries – NZ, Portugal, Spain, Iceland and Greece (10% p.a. in past decade). In China, 15% p.a.·USA has the most biotech firms (2,200), followed by Japan and France (800 each). But biotech patents has been falling – due to more restrictive criteria applied by patent offices, and end of the wave of patenting that followed the decoding of the human genome.·80% of Korean households have high-speed broadband access – also has highest surplus in ICT goods trade balance, followed by Finland, Hungary and Japan.

It is sometimes argued that abundant natural resources are actually an obstacle to development. The “resource curse” keeps developing countries stuck in low value-added and low growth activities. The main economic explanations offered for the phenomenon are:§the “Dutch disease” – exchange rate appreciation as a result of the resources sector renders domestic activity uncompetitive, and labour supply decreases (as the resources sector draws off key labour inputs from the rest of the economy) combine to inhibit non-resource growth.§declining terms of trade and commodity instability prevent capital accumulation.§resources create rent-seeking behaviour that undermines entrepreneurship and growth.§resources sectors generally involve a lack of linkages with the wider economy.

Finland, Sweden, Norway, Denmark, Iceland, New Zealand, the Netherlands, Canada, and Australia share some of these characteristics. These small, open economies have rested their development paths on resource-based sectors, and out of them have developed low- and medium-technology industries that have driven growth. Even where some countries – Sweden, Finland, the Netherlands – have developed significant high-tech sectors, they have supplemented the low- and medium-tech specializations.If we look at NZ, we find that innovation activity is widely distributed across all the major sectors, according with the “pervasiveness” characteristic. Within manufacturing, innovation is found across all segments, regardless of their formal classifications of technology intensity…NZ has innovative low-tech sectors.Innovation policy for resource-based economies can’t simply be based on high-tech sectors…Linkages, development blocks or clusters have not, in similar economies, emerged out of some general propensity to cluster growth – they have emerged from location-specific resources, and have developed in logical ways both forward and backward. The result is strong “vertical” clusters. For NZ, an important challenge is to technologically upgrade and innovate in food & beverages, textiles & clothing, printing & publishing, timber products etc. while also developing their upstream and downstream potential.

Such linkages need not be directly into related manufacturing industries. The clearest case is Australia where the major financial markets in Sydney are heavily focused on specialised finance for the resource sector. Resource exploration involves major risks, and the investment markets in Perth and Sydney are heavily involved in managing the risk-spreading portfolios of the resource sector.

A final question – Are there spillover effects related to resource extraction? Czelusta and Wright (2004) suggest that “if resources are developed through advanced forms of knowledge development, their spillover effects may be just as powerful as anything done in manufacturing”.

Canada’s innovation system needs an upgrade and more money alone will not do the trick.

That’s the message of a new report from Canada’s Institute for Research on Public Policy. The study contends that, despite years of new investments and new programs, Canada’s prosperity growth is lagging.

It highlights three pressing challenges:§Canada does a poor job of commercializing new research.§It needs more innovative knowledge-based industries that generate high value products and services – Canadian firms are not creating transformative products and technologies.§Canada lacks institutions that track innovation investments and build networks between industry, government, and academia.

The report notes that this networking role is a critical component of Canada’s economic future. Canada needs an institution or institutions that will invest in leading-edge research and encourage new research partnerships. Finland’s Tekes organization is seen as a model.

In 2003, the Department of Industry, Innovation & Regional Development (Victoria, Australia) released a very good discussion paper ‘Clusters – Victorian businesses working together in a global economy’ (40 pages).

It proposed a strategic policy framework to select, fund and evaluate clusters in Victoria. We were invited to comment on the document prior to policy decisions by the Victorian Government.

The DIIRD document usefully explains that clusters do not engage in anti-competitive behaviour – they are seen as open systems which encourage competition. Their purpose is not to fix prices, misuse market power by limiting competition, or engage in anti-competitive practices.

Cooperation via information sharing, R&D or export promotion – for the purpose of improving the firms’ competitiveness, not limiting competition.

Other interesting points follow.

Clusters commence and grow in different ways. No model applies to all circumstances.

Clusters may begin by exploiting a natural strategic location, specialised skills, exceptional research institutes, good infrastructure or as a result of the activities of a successful company.

Michael Porter notes that many clusters in Massachusetts owe their birth to the research conducted at the MIT and Harvard University. The Dutch transportation cluster grew out of the waterways of Rotterdam, its central European location and the city’s long acquired maritime skills.

Israel’s irrigation clusters began in response to adversity: desert land was irrigated and turned into agricultural land in order to feed the population.

The golf equipment cluster of San Diego grew out of the technology developed by the aerospace cluster. The Omaha telemarketing cluster owes its existence to its central time location, easy to understand accent and a demanding customer in the US air force.

Clusters develop organically over time. However, Singapore (E-commerce) and Ireland (digital hub) are building clusters by attracting FDI with government support. Singapore is building an e-commerce hub around Hewlett Packard, mainly by encouraging the formations of new SMEs.

Guatemala has been at the forefront of cluster development in central America. The clustering work was initiated in 1998 by PRONACOM, and designed to increase national competitiveness.

A report a couple of years back indicated the focus, and it is a useful guide to activities associated with developing clusters:

§Forestry – business trips (2) to Canada and Finland (best practice/benchmarking) plus seminars on Forestry Education.§Agriculture – efforts focused on industries that are capable of producing added value products, in order to diversify the risk and make them more competitive; a recent development was the Organic or Differentiated Coffee Initiative – to improve technology and to access international markets.§Tourism – efforts are focused in ecotourism, as well as business and incentives.One of the principal activities is creating a data base of entrepreneurs involved in the tourism sector.

The field work is being carried out by students from the Universidad Rafael Landìvar, Universidad del Valle de Guatemala, Universidad Del Istmo.

Australia’s chief scientist, Dr. Robin Batterham, was a keynote speaker at the Global

Knowledge Economy conference in Sydney in November 2002. His perspective will stand the

test of time. Main points:

Australia needs to shape a program that kick-starts new companies and helps them grow towards global opportunities.

The nature of innovation is that technological opportunities just keep coming along.

It is necessary to look for niches, and some companies might take off and become world brands as with Finland’s Nokia. Australia has success stories like ResMed and Cochlear.

Western Sydney has the power to develop powerful regional ICT and biotechnology clusters, and become a role model. Regional collaborations which concentrated on innovation and excellence would deliver significant economic results.

A prime example of this approach is the marine science cluster, where a range of organisations have collaborated for work on toxins from cone shells – this cluster has cost about $20 million in funding, but now looks like delivering a return of around $200 million.

Not every venture will be a winner, but when you get the right focus and clustering for critical mass, that is what will happen.